Good morning, ladies and gentlemen. And welcome to the RumbleON Fourth Quarter 2017 Earnings Conference Call. Today's call is being recorded. All lines have been placed on mute to prevent any background noise. After the speakers remarks, there will be a question-and-answer session and we requests that you limit yourself to one question and one follow up before getting back in the queue. I will now like to turn the conference over to Steven Berrard, our Chief Financial Officer. Please go ahead.

Good morning and thank you for joining our fourth quarter and fiscal 2017 earnings conference call. On the call with me today is Marshall Chesrown, our President and Chief Executive Officer. By now everyone should have access to our earnings announcement which was filed prior to this call. This document may be found on our website at RumbleOn.com under the Investor section. Before we begin, let me remind you that part of our discussion today may include forward-looking statements which are based on expectations, estimates and projections of management as of today. The forward-looking statements and our discussions are subject to various assumptions, risks, uncertainties and other factors that are difficult to predict which may cause actual results to differ materially from those expressed or implied in the forward-looking statements. These statements are not a guarantee of future performance and therefore undue reliance should not be placed upon them. We refer all of you to our 2017 Form10-K and other recent filings with the SEC for a more detailed discussion of the risks that could impact the future, operating results and financial condition of RumbleON, Inc. We disclaim any intentions or obligations to update or revise any forward-looking statements except as required by law. I would like to now turn the call over to Marshall.

Thank you, Steven. Good morning and welcome everyone to the RumbleON fourth quarter and fiscal 2017 earnings conference call. RumbleON was founded on the concept that consumers would prefer to buy and sell pre-owned recreation vehicle through a well-designed, simple online solution with a broad selection of vehicles at highly competitive prices. We recognized that there was a huge opportunity to disrupt the current supply chain solutions for consumers to gain liquidity as over two thirds of all transactions were being completed through the inefficient peer-to peer-market. The market's appetite for such a solution has been extremely encouraging and we're quickly proving that we have the ability to scale the online model for the acquisition and distribution of vehicles in a meaningful way. That is exactly what we began to create and launched in mid 2017 and we're very pleased with the response that we have seen thus far to our offering. Throughout the year, we have gained tremendous support from consumers and dealers all who appreciate the effective, seamless and hassle free 100% online marketplace that we have developed and deployed. This further strengthens our belief that we are on track to achieve our goal of disrupting and controlling meaningful market share of the $7.5 billion road bike market and we are already expanding into other segments in the recreational vehicle market through natural progression. We remain the only platform in the resale market that provides the ability for consumers and dealers to transact to an end to end 100% online marketplace acquisition and distribution solution. RumbleON is already a dominant online source that provides liquidity to consumers and dealers through an easy website or mobile application to get real instant cash offers and we have received consistently great consumer feedback on the buying and selling experience that we…

Thank you, Marshall. Before I begin I just want to remind everyone that there were no sales during the year or fourth quarter of 2016 and virtually no business activity. So we'll not discuss comparative information. For the year ended December 31, 2017, revenue was $7.3 million, driven large part by the sale of 678 vehicles at an average selling price of $10,363 with a $750 gross margin. Net loss for the year was $8.6 million or $0.86 per share. In the fourth quarter of 2017, total revenue was $3.4 million, which was in line with our previously reported outlook and it was primarily comprised of $3.41 million from the sale of used vehicles to consumers and dealers, as well as related vehicle financing and service contracts. During the fourth quarter we sold 355 used vehicles to consumers and dealers at an average selling price at $9,599 and a total average blended gross profit of $764 or 8% for vehicles. We are pleased that we drove sequential improvement from the 6.7% gross margin we recorded in the third quarter. The decrease in average selling price and the increase in both gross profit and gross margin are result of the continued shift in sales mix during the fourth quarter from higher priced Harley-Davidson models to lower price and higher gross margins non-Harley Davidson that Marshall discussed. In the fourth quarter 41% of the vehicle sales were non-Harley-Davidson, as compared to 35% in the third quarter. Other sales and revenue in the fourth quarter was $42,000 and was driven by vehicle finance and service contracts sold in connection with consumer vehicle sales. Total cost and expense in the fourth quarter was $6.3 million, this was a result of $3.4 million in cost of revenue, primarily driven by the sale of vehicles to…

Thank you. [Operator Instructions] We'll take our first question from Dillon Heslin with ROTH Capital Partners.

Hi, guys. Good morning. Thanks for taking my question. The first one relates to the sales channel mix, just going forward, I know before you've put out different percentages that you think its going to vary between dealer, consumer and auction. But you're seeing that continued strength in auction. Is there any outlook into 2018 and beyond as to where you think those will settle down or does it really just depend on where you're seeing the opportunities? And then I have a few follow ups. Thank you

Dillon, good question. We've taken the view after the last six months of dealing with the Street and the investors that the channels to some extent where they fall is really hard to predict. So from our perspective, we're going to be more focused on how many units we sell and what gross margin and getting ourselves to profitability and positive cash flow. Until we get a year under our belt, it’s really hard to predict what channels, what percentages are going to fall on each channel. And right now we're just seizing the opportunity. The fact that we can keep our inventory under 30 day supply because we have this robust ability to liquidate product and we think those margins are continuing to scale. We need to wait.

And I would add that both channels Don are growing at about the same rate. So as part of the total percentage we're running about the same as we were.

Got it. Thank you. That's helpful. And then with the guidance, with the fiscal year ‘18 guidance above $100 million and then taking sort of the $7.5 of first quarter. Just curious as to where you - what's giving you the confidence in that second half ramp, is it really just related to the huge sort of January and February you're seeing so far that you're expecting to continue and grow further?

Yeah, I think it's - we look at the growth that we've had from December to January, January to February and even extrapolating that out on a more conservative basis. So we still feel very comfortable with the $100 million. I do think that you know, when that was originally put out, I think that was on an average of about 12 to 12.5 which came from our previous tests and obviously we're seeing a lot of volume opportunities in the lower – in lower price point. But I will tell you on the raw dollar margin the lower price point is performing at the same dollar margin, thoughts a much higher percentage ROI on the inventory.

I think the other check for us is, from the time we started and put out that outlook the volume of units were either tracking or exceeded. And that is a result of that, we think the acceleration is significantly higher than we originally anticipated. The market is much more liquid in terms of our opportunities buy product. This is really a buying product challenge. It's not selling it. We proved we can sell it by the fact you know, when is the last time you heard a vehicle retailer have they turned in their 20s, because the market there to seller it’s buying of it, that’s the bigger challenge for us. But from our perspective looking back on when we originally started and when we first put the outlook out you know, we are probably in excess of the units and the only difference been average selling price and we suspect that's going to – that allowed us at some point as well. But we certainly can take advantage of the opportunities as the present it.

Yeah, I agree with Steve and I think that it is a story about what we can acquire and we've obviously made significant improvements on not just the raw volume of cash offers coming through the system, but also the capture rate associated to it with better pre and post you know, these offers are good for 72 hours. But I think we're doing a much more organized and better job of pre-communication and also post-communication after the - after they've expired to try to increase that capture rate. We've seen some early on really good success with that process.

Okay. We’ll go next to Nehal Chokshi with Maxim Group.

Yeah, thank you. Could you guys can share what your capture rate was in the quarter?

In fourth quarter, yeah, I can share fourth quarter. So fourth quarter was little bit less than 12%, but it has increased significantly since then.

Okay.

Just for our previous experience in automotive, we very seldom ever got past 10. So I think a lot of that has to do with the fact that there isn't a lot of competition out there, but we're also you know, maintaining very, very - we aren’t being extremely conservative because we see the market where they're at. And we don't obviously in the early days we want to make sure that we have a brand of fairness.

Okay. Understood. Now I know you've probably addressed some of this during the script, but I just want to make sure I got it right. So what you're seeing is a shift in mix to what you're selling into to be more dealer focused than consumer relative to your prior expectations. And then on acquisition side, it looks like it's more auction focused and consumer focused, is that correct?

No let me correct you there. We do know [ph] purchasing options. We only acquired from - direct from consumers, primarily the lion share of what we get is consumer direct. The rest is from dealers and as we said in this script, we're having a lot of success, early success with regards to automotive dealers since they really don't want to keep a motorcycle they taken on trade. And most of them have never had the opportunity to aggressively go after them. On the distribution side, its consumer and dealer you know, again like I said in the script, keep in mind that whether a dealer buys it direct from our website or they buy it through one of the auction channels, it ends up being retailed to a consumer at the end of the day. So this is truly a complete supply chain solution from starting where the pre-owned vehicle exists which is in the hands of a consumer and redistributing through the process back to the hands of the consumer.

And I’ll add to that. I think we're pretty much on track where we expect it to be in terms of the consumer. The only difference that we've seen is units were selling to dealers are going through auctions as opposed to - on our website.

And I think it's - you know, as we - we've been very, very short time building the retail channel online and it does take some time and we're one - we're one dealer. It kind of makes sense that there's over 10000 recreational vehicle dealers out there between franchise and independents and they're all accessing their inventory through the auction channel. So it just gives us another opportunity to spin inventory significantly faster and that has always been our intent is to buy and sell at scale and at big volume motorcycles. So I think you know, from our perspective it's clear that we can both acquire and distribute at volume now to a matter of ramping the volume and doing it profitably..,

Right. Okay. If I look at your guidance I extract out and implied OpEx at around $4 million for the March quarter is that correct? Using the midpoint guidance parameters, extract OpEx around $4 million, is that right?

Yeah. Its right.

Okay. All right.

[Operator Instructions] We'll go next to [indiscernible] with Aegis.

Thanks very much. [Technical Difficulty]

I think the key in the fourth quarter is we are now starting to get the leverage part of the business. Our expense is 80% of them are tied up in marketing and headcount. Our headcount in the first quarter starting to level out, where we’re you know, the $4 million of revenue we may add only adding $100,000 payroll. So we - and as we look into 2018 the number does not increase dramatically relative to the huge increase in sales volume. The variable still is in marketing and that's controllable on our part. But we are going to be aggressively spending in marketing. So in some respects we're going to control, what that bottom line ultimate result is and the trade-off is going to be growth. Are we gaining market share, remember we need to build the moat around our capital and that is probably in our brand and our technology, the two things that we're going to spend money on in ‘18. But we are starting to see leverage and that's why the first quarter - first time you actually see where expenses starting to level out and we're starting to reach a reasonable level - predictable level of expense. Go ahead. I'm sorry.

Sure. Thanks for taking my question. So Harley-Davidson [indiscernible] they’ve talked about some level stabilization trend in terms of the used bike prices here over the last few months and quarters. I wonder if you're seeing something similar in marketplace, not just for Harley but for the heavyweight bike category overall?

Yeah, pricing seems to be staying extremely stable. When we were tracking it in late 2016, we saw a little more fall off in the fourth quarter in valuation than we saw in ‘17. So you know, the demand definitely seems to be there. I think the fact that Harley-Davidson has chosen to cut production might be helping that on the pre-owned side you know, keeping in mind that if they reduce production and we have the same bikes it's significantly less cost, we have an opportunity to capture market share.

Okay, great. And just a quick follow up question. I think you saw top, if I remember correctly in third quarter consumer sales probably due to Sturgis and with Daytona coming up, A, I want to ask what kind of sort of marking programs you have with that Daytona bike will come. And second, if we might see a similar sort of top given that event here coming up in March? Thanks.

We – well, first off I’ll tell you what our plan is, Daytona Bike Week is one of our - what we call our guerrilla marketing opportunities. We have a key position. We have one of our semi trucks and trailers. We have our road team there which goes out on the street to Daytona and engages with people to do things like downloading our app and various other things. We have a bunch of engaging things into our site - into our site this year. We're out at the Speedway with all the manufacturers and all the major suppliers and we have a whole bunch of different things planned in the space to engage with consumers and let them know who RumbleON is. You know, it's estimated that they'll be five to 700,000 people there. The majority of them do go through the - through the tradeshow portion of it if you will outdoors. But we also go manually on the street with our - with our RumbleON girls. And you know engaged with all of the consumers that we possibly can. We think that Sturgis was a huge win last year. From a visibility perspective we were a brand new brand out there. And I think you know, again it's an industry that's interesting from the standpoint that very few that - certainly that I've ever been involved in, can you find that group of density of people that are sitting on the back of the product that you buy and sell. So is a very, very tight demographic and a great place from our estimation to generate business.

I might add, our outlook design include anything from those type of events.

Yeah, that's a good point. And we don't - we won't be taking physical motorcycles to Daytona. The Florida laws as do most laws prohibit it. In Sturgis we were able to because they allow in South Dakota a temporary dealer license. So we will be engaging with them online. We have big 80-inch TVs that they can go on an iPad and shop our inventory in and get it - get their cash offer on their bike et cetera. But it's made to just interact with people that are passionate about the product that we buy and sell.

Great. Thanks very much.

[Operator Instructions] Okay. We’ll go ahead and go back to today’s speakers for any additional or closing remarks. Okay. It does look like we have one more question and we’ll go to Nehal Chokshi with Maxim Group.

Thanks, guys. I wanted to get a little more detail on the agreement with Ally, the Floorplan [ph] credit line because you disclosed was the interest rate and was the specified equity debt for inventory that will be financed. And then what are the metrics that need to be met for Ally to expand that line of credit as well?

First off it's a traditional floor plan line of credit. So there's nothing nuances of that - it wouldn't be traditional to the vehicle industry as a whole. Ally obviously is happy to grow above and beyond the 25 million, based on sales performance et cetera. But as of right now the – it’s pointed up here to see where the current rate structure is, but its.,.

85%...

Yeah, in [indiscernible] advance works just – we kind of dig that up real quick. The advance is 85%, so on a 10,000 or bike obviously, $8500. But the need for you know, why we have capital and why we raise the capital, as we've stated in a lot of previous conversations is obviously to fund that equity and Floorplan.

Great.

It's about 5% to 6%. But again, I'm trying to find the document here to give you an exact answer. But again, it's very traditional what the - if you were to compare it to a Floorplan with any of the automotive, which they do a lot of automotive financing, it would be somewhere and all of the - all of the requirements et cetera are similar as well.

Okay, great. Thank you very much.

So with that, I will bring this call to a close. Thank you very much. We look forward updating you again at the end of the first quarter. Thank you.

Thanks, everyone.

And this does conclude today's call. Thank you for your participation. You may now disconnect.